Super fund HESTA concerned about Chris Ellison’s long goodbye from Mineral Resources

Superannuation giant HESTA has placed besieged Mineral Resources on a governance watch list as the lithium and iron ore miner struggles to recover from a tax scandal that has spread from managing director Chris Ellison to its board.

The miner revealed on Monday that the billionaire founder would stand down within the next 12 to 18 months after it released damning findings of a long-running probe that discovered “at times Mr Ellison has not acted with integrity” and that he “failed to be as forthcoming with the board as he should have been”.

The board’s investigation was launched late last year over a secret deal that Mr Ellison struck with the Australian Taxation Office after voluntarily disclosing a scheme involving equipment sales through a British Virgin Island company.

Chair James McClements will also quit within the next year.

HESTA chief executive Debby Blakey said the super fund “remain(s) disappointed with the company’s response to date”.

“Our concerns include that the managing director’s succession timeframe does not reflect the seriousness of the issues and that the issues identified indicate a systemic failure of governance at the senior management and board level,” she said.

“As a result, HESTA has placed MinRes on our watchlist, and subject to our engagement escalation framework. Watchlist companies are the focus of closer direct engagement and monitoring.

“Our engagement escalation framework also considers voting against director elections, supporting or filing of shareholder resolutions, and consideration of divestment where HESTA considers there is inadequate evidence of progress to address risks and it is in members’ best financial interests.”

HESTA, which has a 0.9 per cent stake in MinRes, also has Woodside and Santos among the other companies on its watchlist.

The super fund’s comments come just days after powerful proxy adviser Glass Lewis called for long-time members of MinRes’ board to be more accountable for Mr Ellison’s tax dodging.

The US-based firm also wants the board to name others who may have benefited from co-owned offshore companies that allegedly profited from equipment sold to the listed mining and services group.

MinRes share price is yet to stage a meaningful rebound from a market collapse triggered by media reports of the tax avoidance scandal, which Mr Ellison called “a poor decision and a serious lapse of judgment”.

The company’s market value has plunged from $9 billion to just over $7.2b in under two weeks.

Mr Ellison is the biggest shareholder. He is set to make his first public appearance when MinRes’ annual general meeting is held on November 21.

Ms Blakey believes the company should act before then.

“We believe the MinRes board has a critical opportunity ahead of the company’s upcoming annual general meeting to provide investors with confidence they are taking appropriate action to address,” she said.

The latest headaches for MinRes will not be helped by a decision from ratings agency Moody’s to cut its outlook for the miner to negative.

“The change to negative reflects Moody’s expectation that leverage will remain high and above Moody’s … tolerance level for the rating over the next 12 months,” it said.

On Thursday the Australian Securities and Investments Commission said it had launched a formal investigation into allegations related to Mr Ellison’s tax dodge scheme and related allegations he profited from equipment sales at the expense of MinRes shareholders.

ASIC deputy chair Sarah Court told a Senate committee the corporate cop had launched the formal probe after having examined allegations outlined in media reports about Mr Ellison’s financial affairs.

Ms Court said ASIC already “has some engagement” with the Australian Taxation Office and “the investigation will follow the normal course”.